Help buying a receiver

I'm not all that electronic savvy and I bought the sony srg520 and am now reading that this receiver doesn't "process the audio found on the HDMI inputs, nor will it transcode or upscale analog and component video inputs to the HDMI output or vis versa." I just plan on watching movies, playing ps3,other normal actitives on my Lcd 42inch screen; what does the no upscaling and no processing of audio mean in terms of quality, sound, etc.